The Canada Revenue Agency (CRA) is ruling out the idea of carrying out compliance audits on nearly 24,000 cases where a subsidy was granted to businesses in the wake of the COVID-19 pandemic.
These cases are among the more than 50,000 that had been identified by the office of the Auditor General of Canada for validation purposes that there was no overpayment or deliberate fraud.
“It is never the agency’s intention to carry out an audit which nevertheless presents a significant burden both for the taxpayer and for the agency if we do not believe that there is a sufficient risk of non- observation,” said in an interview with The Canadian Press Cathy Hawara, Deputy Commissioner at the CRA.
She argued that, according to an internal report on collection efforts, Ottawa reaches the “conclusion […] that, for the most part, the risk (that the Auditor General saw) did not materialize.”
“So, in fact, there remain almost 24,000 applicants who have been identified by the Auditor General. For the moment, we are not proposing to carry out audits,” said the deputy commissioner of the Compliance Programs Branch at the CRA.
Third parties at fault
The report, which is expected to be made public on Monday, indicates that “more than 94% of the amounts reviewed were approved.” The data put forward in the document gives a portrait of the situation as of the end of March 2023.
According to the analysis that was carried out, cases of overpayment concern small and medium-sized enterprises (SMEs) much more often than large employers.
More specifically, the issues identified in the report concern the Canada Emergency Wage Subsidy (CEWS), government assistance which aimed to prevent layoffs by entrepreneurs severely affected by the economic consequences of COVID-19.
Among the cases considered to be abusive, the CRA mentions the often noted intervention of third parties — or “preparers” — who helped companies circumvent the eligibility criteria.
The report mentions CEWS requests that were made “for fictitious employees.”
In these specific cases of deliberate circumvention of the rules, who will have to reimburse the CRA for the amounts that should not have been collected: the company or the third party?
“When we issue a new assessment – if we refuse or when we conclude that certain amounts should not have been paid (by the government) – it is the applicant, therefore the employer, who is responsible for making the reimbursement and to pay the debt,” replies the Deputy Commissioner.
The report also highlights that, in addition to recovery, “the vast majority of penalties imposed (86% or $12.2 million) concern files related to preparers.”
A certain flexibility for SMEs?
Furthermore, she maintained that the CRA is aware of the budgetary challenges experienced by several SMEs which are still having difficulty recovering from the horrors of the pandemic.
Mme Hawara said contractors will have the ear of the CRA, suggesting some flexibility in fund recovery deadlines.
“We are very, very aware of the current situation and it is certainly not our intention to make the situation worse for these employers. »
The CEWS, a program which is no longer in effect, paid $100 billion to 460,000 employers across the country. Ottawa estimates that this helped five million Canadian workers.
The CRA recalls in its report that certain automated verifications were carried out before the payment of the subsidies. Others, more advanced, are still being done after the fact.
The pre-verification process can last months or years, depending on the complexity of the file, explained the deputy commissioner. Therefore, we do not expect to close the books on CEWS-related audits before 2025.